HMO outrage for landlords & tenants – this time it’s Council Tax!
Published 02/07/2012 We have received an anonymous tip off that could cause yet another HMO outrage and could be a disaster for both landlords and tenant groups if the rumours are indeed true and are implemented.
Allegedly, Torbay Council collated data of all HMOs in their area two weeks ago and are intending to charge Council Tax based on each room being a Band A property (£996.55 a year currently). By way of comparison, a six bed HMO now in Band E would incur a council Tax bill of £1827.01 per annum. The new plans will yield £5,979.30 a year. That’s a whopping 227% increase!
Our informant told us that one of the reasons for doing this is to move the unemployed out of the area. I can’t see how that will work though as the unemployed should qualify for exemption from Council Tax. Is this a way for Torbay Council to increase its share of the public purse I wonder? Another sinister view is this could be a longer term plan to drive out the unemployed when benefits fall under the proposed Universal Credit payment system.
What will this do for homelessness?
We have recently seen Newham Council in London attempting to relocate its unemployed to Stoke on Trent. Are other councils going to adopt what some might see as social cleansing policies?
HMO Outrage – What Devon Landlords Association had to say
On receiving this tip off I spoke to a representative of Devon Landlords Association who had heard nothing of these plans but was very concerned. They will be making their own investigations.
Concerned tenants living in HMOs in Devon are advised to contact Devon SmartMove
Rest assured we will provide more information as this story unfolds. I’m sure it will not be long before the powers that be in Torbay Council will learn of the existence of this article and we very much hope they will provide a definitive response in the comments section below. In the meantime, please let your own feelings be known by leaving a comment below.
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Mark Alexander says:
02/07/2012 at 14:14
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Industry Observer says:
02/07/2012 at 17:57
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Mark Alexander says:
02/07/2012 at 18:18
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Gary says:
02/07/2012 at 18:38
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Peter Lewis says:
02/07/2012 at 20:29
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Paul Barrett says:
02/07/2012 at 23:59
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Mathieson Melrose says:
03/07/2012 at 07:35
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Alan Palin says:
03/07/2012 at 11:33
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Mark Alexander says:
03/07/2012 at 14:12
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Dave says:
03/07/2012 at 15:21
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Ian Ringrose says:
03/07/2012 at 22:45
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Paul Barrett says:
03/07/2012 at 23:35
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Tee says:
04/07/2012 at 05:55
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Mark Alexander says:
04/07/2012 at 07:55
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Paul Barrett says:
05/07/2012 at 03:24
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Richard Ashton, RLA says:
05/07/2012 at 15:14
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don says:
08/07/2012 at 10:51
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alan says:
10/07/2012 at 12:00
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Mark Alexander says:
18/07/2012 at 17:54
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cosmo146 says:
18/07/2012 at 18:46
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Mary Latham says:
18/07/2012 at 19:38
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monster says:
08/09/2012 at 07:01
Leave a commentUPDATE – we’ve had another tip off that Torbay Council are also looking to licence anybody with a room to let.
I very much doubt that the Regulations controlling Council Tax enable a local authority to do this.
And since when are unemployed people an exempt category for C Tax unless also receiving full LHA and thus qualifying for support for Council Tax. They are not exempt – they get a benefit to pay it. That is different from being exempt – they still have a liability to pay but the money comes from elsewhere.
You are quite right, unemployed are not exempt from Council Tax, bad use of words on my part. As you say though, they get benefits which pay it for them. Same difference really isn’t it?
Surely this would signal the end of HMO’s as we know it!! As landlords of HMO’s we are in a way performing a social service – so where are they going to place all these people?
As Chairman of a leading Landlords’ Association in the South West and one that tries to work closely with all local Authorities in the region I am surprised and a little annoyed if this rumour is true because it throws the notion of consultation out of the window. I know that most of our HMO landlord members will be astonished by this if it is true. And so will all those tenants who will be directly influenced by this decision. No landlord will be able to absorb this additional cost in to their outgoings without passing most if not all on to tenants.
I am amazed that at a time of austerity, Councils are even willing to contemplate increasing charges to those least able to cope with additional costs. Most people on LHA are in work and need LHA as a top up to enable them to make ends meet. If the Council thinks this is a way to remove their problems they are mistaken as we need workers in our region to meet the demands of our most important industry – Tourism, which is not the best paid anyway.
I urge Torbay Council to respond to this rumour and come out clearly and deny it. This would be welcome if the rumour is just that, a rumour as if it is intentional it could have a disastrous effect not only on tenants but also on the letting industry in the region. Most landlords are not grasping people and many see what they do as helping people who need somewhere to live. Even landlords need to make a profit to survive and if they don’t they may well leave the industry. Where would the local Authorities find themselves if they are not able to call upon the PRS to help solve their housing problems. So let us not have local authorities shooting themselves in the foot over this issue and let us have more consultation with the representatives of landlords so that foolish notions are not considered and even more foolish decisions made.
That means that these homeowners will have to obtain a CP12 anuallly for ALL gas appliances.
They should do this now; most don’t.
Tv licencing would be very interested in this info as any lodger has to have a separate TV licence.
Nobody ever does this in a normal houseshare.
How would the councils ascertain who these homeowners are that are letting their spare room.
Only normally traceable if the lodger was in receipt of benefits.
Technically the householder who lives alone and is in receipt of SPD would have to give this up as a lodger lives there.
So immediately the homeowner is about £325 out of pocket.
No homeowner ever advises the council unless the lodger is on benefit as the only way to obtain CT benefit is for the lodger to be on the CT bill.
If the homeowner doesn’t do this then it is presumed that the rent includes CT and the claimant does not receive CT benefit.
Not many RFR LL are aware of that.
But still an actually mad admin issue if the council ever tried to licence RFR LL
As commercial financier of many HMO portfolio’s this proposal is a concern as it will undoubtedly put the gearing of many operators at risk . However it unfortunately seems a reasonable step for cash strapped councils to consider in an effort to generate income no doubt by a zoning program me. I suspect the local electorate in the most part would be in support of such steps as it may well free funds to further develop other services and protect core values
I have had the same problem with a HMO in North Cornwall, see link to Property Tribes:http://propertytribes.ning.com/forum/topics/hmo-council-tax-dilemia-valuation-office-want-to-charge-council?id=2886658%3ATopic%3A438484&page=1#comments
The VOA eventually backed down, but only after I threatened legal action, appeal and a national campaign with the RLA!
Alan
There is a related discussion I’m involved in over on the Property Tribes form. It would appear that The Guardian have also reported on a very similar topic. The following comment was made over on Property Tribes.
There was an interesting article in The Guardian about the subject.”Cash-strapped councils can make thousands of pounds when a HMO is re-valued and split into separate units. Tenants in band A homes typically pay about £1,000 per year each in council tax, while the landlord of a band E or F property is charged about £2,000, a sum normally recouped from tenants through rent.Not only can an authority increase its council tax receipts after a HMO is split into discrete “homes” but, thanks to the bonus, it gains twice. Under the NHB scheme, designed to encourage local authorities to approve new housing, the authority receives a sum equivalent to the council tax chargeable on each extra property for six years, plus a further £350 per year if the home is deemed “affordable”….”I am not sure how LHA/HMO landlords will react to the changes, but I for one will stick to studentlets. I did consider to venture into the LHA/HMO market with the help of an experienced LHA landlord but I am completely put off by the current situation (Article 4 + LHA arrangements) and even more by things to come (UC).
As you said Mark, “train crash in slow motion”.
Link to Property Tribes discussion:- http://propertytribes.ning.com/forum/topics/hmo-council-tax-dilemia-valuation-office-want-to-charge-council
Council tax is charged on the property and not individual rooms so how can they get away with it,
and if they are on benefits who pays in the end?
If I recall correctly a lodger only need a TV licence if there is a lock on their room door, I think the “lock on the room” may become the key factor for Council Tax as well.
I don’t think this is the case as if you put a lock on the door with a lodger gthen defacto the lodger becomes a tenant.
I guess to check out TV licencing website.
Acadmic really as if a property is a single dwelling TV licencing will never know you have alodger with a TV in the room.
Of course a licence is also needed if viewing on a lap-top.
TV licencing aren’t that sophisticated yet and so nobody bothers.
They just work on the presumption that every property has a TV and they enforce from that level only.
Renegotiate ASTs for residents to pay own Council Tax. Nearly all will pay zero due to benefit. You save money on expenses and only a few slight reductions in rent. Council now out of pocket!
@d2a64f128c73ae537e8368163a803540:disqus It’s not that simple.
The Council get government money to pay benefits, therefore, the Councils are simply finding a way to get more money. When Universal credit comes in and benefits get reduced, who pays then. Either way, the poverty trap widens if people now have to find an extra £1,000 a year after taxes. Also, several landlords are withdrawing from the HMO LHA market and letting to self supporting tenants only, where does this leave them? The only people that are unlikely to be affected is students (who are exempt) and student landlords. Wasn’t this why Article 4 planning was bought in though? It’s time to start investing into B&B’s I reckon.
Yep Mark absolutely correct, coastal towns with those big houses with B&B in them will take a fortune.
Far more than the silly LHA amounts
I reckon in Margate you could get £45 per day
Crikey that is £1395.00 per month
The council tax in Margate will have to increase substantially as they will have to pay the Temporary accommodation costs.
So LHA on a single room in a HMO say £420 per month with no council tax bill for the tenant, but of course Article 4 means not enough HMO’s around.
It is going to cost councils 4 times what they pay out on LHA.
Also as far as I am aware there is a lwa that councils can only house someone in TA for a short period.
Where will these people be put then as there will be no private HMO’s!!!!
Talk about unintended consequences or what!!?
Once govt starts e3eeing the demand for increased budget for housing at councils they will query why and then will they be told about Article 4 and the effect it is having.
I reckon the govt seeing the massive increase in benefit required for TA will do a volte-face and stop councils using Article 4.
There are only so many B & B’s in the UK and certainly not enough for the claimants.Of couse private tenants should start seeing more property availability as LL convert HMO’s back to normal dwellings; but of course that is if they are allowed to do so!?
Also would it be cost effective.
I reckon these circumstances could bankrupt quite a few LL
Would it be possible to turn a HMO into a B &B as LL would make far more that way.
Food for thought maybe as it seems councils are hellbent on using this Article 4 planning
I reckon I am sitting pretty with my bog standard normal flats.
I think the ndays of sweating an asset are long gone and consequently viability for LL will reduce.
They will just decide the margins aren’t there and try and withdraw from the market.
How any of this is supposed to assist in the housing crisis I will never know.
Apparently there are 233000 new households being created yearly.
where are they all supposed to go!!?
For rooms in HMOs to be considered for Council Tax banding they must be self-contained, and valued independently by the VOA. If these criteria are not met then a local authority cannot demand such payments.
nothing new for eastriding council when i had a hmo house in withernsea they charged full tax on each room
Hi I am a landlord in Northamptonshire and had the valauation officer round after the council had been tipped off i had converted the house into flats. We converted a semi detached house into three studio rooms (each with its own Elfin kitchen but they all shared a bathroom) they tripled the rates from £941 to £2023 per year and classed a room 12ft x 13ft as a band A ratable value dwelling. When I asked him what the criteria was for doing this he told me it was because each tenant had an individual tenancy agreement which made their room a dwelling. there is no redress for this as it boils down to his opionion.
I asked if the following criteria whould class a room as a dwelling and the answer was no in each case. Locks on the dorrs, microwave in the room, fridge in the room, all where no. It was the individual tenancy agreements which mattered. When i told him that every HMO in corby was like this he agreed and that they would also have to pay multiple room rates if they were reported to the council when i told him that this would make them all unprofitable and result in 100,s of tennats being put out on the streets he said it wasnt his problem.
The local NLA rep could offer no help than “they were also trying it on in Wellingborough” but he did suggest i contact my local MP. Lousie Mensch but as she never visits Corby that was a great suggestion. The national NLA help line where no better (Why do i bother paying my membership)
Its made a nice liitle HMO of mine with nice tenants absolutly non profitable so what do i do.
UPDATE – I have just received this email from Torbay Council
Dear Mr Alexander
You recently sent an email to the Council Tax inbox at
Torbay Council asking if it was our intention to charge Council Tax band A for
all rooms in houses of multiple occupation.
In answer to your question, the local authority can only
issue a Council Tax demand to a property that has been banded by Her Majesty’s
Revenue and Customs, Valuation Office Agency (VOA).
At present the VOA have made no changes to the way that
houses in multiple occupation are banded, and therefore only one Council Tax
demand would be issued.
If in the future there are changes made to the Council
Tax list then the local authority would have to amend records and bill
accordingly.
If you need further advice on this aspect, then you will
need to make contact with the VOA direct.
This can be done by telephoning 03000 501501 or via the
website http://www.voa.gov.uk/corporate/contact/Offices/exeterOffice.html#address
If you require any additional information, please let me
know.
Regards
y Ian
Westwood
Revenue Coordinator
Revenue Section
Torbay Council
Town Hall
Castle Circus
Torquay
‘ (01803)
207187
8 ian.westwood@torbay.gcsx.gov.uk
well….boys and girls……I did predict this 5 years ago.
I’m a landlord based in Rugby. to keep up with the new 2004 housing act my colleagues and I went to all the council hosted forums which was nothing more than an invitation to be spoon fed poo.
when analysed, the true nature of the changes to housing legislation became obvious.
there was only one end game. Mrs. Thatcher called it ( or rather the press did ) pole tax.
the concept was a means to tax individuals within a house and not the house itself.
In every HMO you have individuals. and they will pay pole tax. the unemployed will not.
so an HMO, student let, a house/flat share, will all come under this rule.
councils have been asking for this for years to pay their very large pension bill.
I have just caught up with this thread and the one on PT. I posted this on PT for information that might help those who have to fight a Council Tax rebanding case.
Last year I fought a case for a landlord as follows
1. Landlord owned and let a large traditional HMO with 6 rooms over 2 floors
2. Tenants were all unrelated and had separate AST’s
3. Each tenant lived in his own room which has a “kitchenett” and shared the bathrooms, toilets and livingroom
4. The landlord was billed for council tax for the whole property
5. Tenants were people on modest incomes who paid £60 a week for each room
The landlord decided that it was time to upgrade the property and to divide each bathroom so that each tenant had a self contained unit which included a small shower room. No walls were removed, partitions were put in and doors blocked onto hallways and opend into bedrooms. The landlord did not need planning consent but he did apply for building regs.
When the work was completed the Valuation Officer called, no doubt he was told by the Planning Department. He informed the landlord that each unit was now self contained and therefore would be banded separately for Council Tax. The overall bill was 400% of the orginal Council Tax bill and each tenant was billed separately.
The landlord was horrified and discounted his rents by the amount of Council Tax that he was saving. In less than a year he had 2/3rds of the rooms empy because his tenants could afford the rent but not the additional Council Tax despite being given better accommodation they moved out. The landlord could not fill his rooms.
We fought this all the way to the Senior Valuation Officer in Birmingham and we lost.
The reason that we were given was
While the properties were traditional bedsits with cooking facilities but shared bathrooms/toilets the property was an HMO by Council Tax definition, this is totally separate from the HA 2004 definition of an HMO. Once the personal hygene facilities became self contained the property was, by Council Tax definition, a block of self contained flats which must each be separately banded and the tenants would be liable for payment.
Obviously the Valuation Office mentioned in this discussion uses different rules?The rules that Birmingham have used protect the tradtional HMO from the issue.
As an aside If a student property in Birmingham is let on separate AST’s the landlord is responsible for payment, if they are all on one AST the students are responsible.
I know that students are exempt from Council Tax because they are in full time education but last year Birmingham began charging for the period from the end of term, June until the start of the new year, October on the basis that during this time they were not in full time education and many of the tenants worked!!
Tee, the council will not be out of pocket! – for every student or unemployed person that is exempt from having to pay their council tax themselves, the local authority claims that amount from central government – so you and I and every taxpayer area actually paying it. This is absolute fact that very few people realise, the council still receive that payment, it just comes from central government instead.
So when the VOA re-band a property into many individual Band A’s and the now many individual council tax bills fall on the unemployed or a student who is exempt, this amount is reclaimed from central government by the council – it is an outrageous scam and just to wind you up a little more – Central Government in its desire to increase house building offers a bonus to each local authority for any new dwellings they create, this bonus is equal to the council tax payments paid to the council for the first six years after the creation of any new dwellings – our research shows us that councils are submitting each of the individual newly banded HMO rooms to central government as a new band A dwelling and collecting a ‘New Homes Bonus’ equal to the council tax for the first six years – A property we are aware of has gone from the landlord paying a Band E payment of approximately £2000 a year to each of the 10 bedrooms (they are not self contained) now facing a levy of approximately £1000 giving the council a new tax take of approximately 10,000 a year matched by the governments New Homes Bonus equal to the council tax levy of another 10,000 a year so a grand total of approximately £20,000 a year for the first six years, and the majority of this will be paid for through tax by central gov as many – if not all the future residents of HMO’s will be council tax exempt.
Don’t take my word for it, do your own research – fire off your own freedom of information requests and spread the word, these cooks in the councils must be stopped.